BAE Systems and EADS terminate merger discussions

BAE Systems and EADS have terminated their discussions regarding a $45m merger of the two companies.

The proposed merger, announced on September 13, would’ve seen the creation of a dual listed company with BAE Systems holding 40 per cent and EADS the remaining 60 per cent.

If successful, the combined aerospace and defence company would’ve created a European entity to rival Boeing in the US.

In a joint statement the companies said, ‘Notwithstanding a great deal of constructive and professional engagement with the respective governments over recent weeks, it has become clear that the interests of the parties’ government stakeholders cannot be adequately reconciled with each other or with the objectives that BAE Systems and EADS established for the merger.’

They added, ‘Discussions with the relevant governments had not reached a point where both companies could fully disclose the benefits and detailed business case for the merger. BAE Systems and EADS are, however, confident that these would have provided a strong case to take to their shareholders.’

Ian King, chief executive of BAE Systems, said: ‘We are obviously disappointed that we were unable to reach an acceptable agreement with our various government stakeholders.

‘We believe the merger presented a unique opportunity for BAE Systems and EADS to combine two world class and complementary businesses to create a world leading aerospace, defence and security group.’

Tom Enders, chief executive of EADS, added: ‘It is, of course, a pity we didn’t succeed but I’m glad we tried. I’m sure there will be other challenges we’ll tackle together in the future.’

Industry view: what next for BAE Systems?

Howard Wheeldon, director of policy at ADS, the trade body that represents the UK’s aerospace, defence, security and space industries.

‘BAE has reverted to where it was two weeks ago, with a sound forward strategy based on what it has been doing very well for very many years

‘It had tried to undertake an agreed exercise with EADS to merge. That hasn’t transpired - not through the fault of either party but rather through one particular government.

‘Now its back to the original drawing board, its more of the same: its more defence technology/diversification…It’s a continuation of strengthening the five home markets that they’ve got.

‘Clearly, the city is going to exert a degree of pressure and the company will respond by talking to its larger shareholders - that is a natural part of the process.